RESULTS
1ST QUARTER 2017/18
1 APRIL 2017 TO 30 JUNE 2017

3 August 2017

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Market Factors and Strategy

HOY / HOYA

2Results 1st Quarter 2017/18

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives

LEHN

SMI
Source: Swissquote••••

3Global market shareof 50+% in Industry
Benchmark inservice and productquality
4 production sites
and 4 R&D centersin Europe and Asia
Sales of CHF 264.5
million in 2016/17•••

Market capitalizationof CHF 1.4 billion
Dividend yield >3.5%
in each year since2009
Continued sales
growth and strong
margins

Results 1st Quarter 2017/18•••

Reinforced investment in innovation
Solid growth perspectives due tounderlying trends
Strong foothold inChina1. Application: Mild Hybrid Car

1248

7
A

1 AC/DC converter

A HSN

2 Lithium-ion battery
3 Battery controller
4 DC/DC converter
5 12-volt battery
6 12-volt electrical distribution center
7 Electric motor/generator
8 Electric supercharger
43B

65

Mild hybrids are internal combustion engines
equipped with an electric drive. They employ
regenerative brake and some level of power
assist to the internal combustion engine.
Mild hybrids provide the benefits of hybrid
technologies, with less of the cost–weightpenalty of a full hybrid series-parallel
drivetrain.
In electrical mode, LEM’s HSN families
control the power transmitted by the inverterto the electrical motor. CAB families monitor
the transfer of the generated energy to thebattery pack while driving and braking with
best-in-class accuracy. LEM’s transducers
are compact, easy to integrate and theirsuperior accuracy allows the system tocontribute to reduce vehicle emission andimproves the hybrid car’s electrical range.

B CAB
Results 1st Quarter 2017/18

1. Application: Locomotive

A LTC 100B DVL

Inverters are used to transform the energy
into the right voltage and current to drive themotors. Voltage and current transducers areused to measure the current and the voltage
on the secondary side of the transformer
and on the DC-side. Special differential
transducers are implemented at thesecondary side of the transformer to detect
any leakage current flowing in the train.

1A5AB
314Additional inverters are used for heating, airconditioning and ventilation. Transducers areused to measure the motor currents in orderto optimize their efficiency.

241 Pantograph
2 Transformer

43 Inverters
4 Motors
5 Auxiliary inverter

5Results 1st Quarter 2017/18

1. Application: Smart Grid Medium Voltage Line Monitoring

45

3

1A

2

With new Internet of Things telecom
networks, monitoring overhead power lines ismade possible. Thanks to an ammeter,
installed between two poles, the grid operator
can visualize in real-time the current flow inorder to optimize the power line capacity to
distribute more electricity.
The wireless ammeter sends data over atelecom relay to a secured database in thecloud. The energy management platform canregulate, alert and notify the maintenanceteam if needed.

A ART
1 Ammeter
2 MV power line
3 Telecom relay
4 Cloud and database

The ammeter uses the rogowski coil ART tomeasure the current, detects line aging
depending on the level of current, and helps
prioritizing line capacity and regular
maintenance.

5 Energy management

6Results 1st Quarter 2017/18

1. Application: Solar plantIn solar plants, the generated electricity is
fed into the grid. Current transducers in theinverter control the energy flow to the grid.

1

The performance of the overall installation ismonitored in order to maximize its efficiency.
The inverters used for the conversion of thepower to the grid ensure this efficiency.

1B
2
1

1 PV strings
2 Combiner boxes
3 Inverter

A LF xx10 models

73

A

To detect a defective solar panel, the current
produced by each PV string is controlled
and compared in combiner boxes where PVstrings are connected. Preventive
maintenance can then be realized on
specific panels in case of lack of balance
between strings.

B HO xx-P models

Results 1st Quarter 2017/18

1. Diverse Target Markets – Diversified Businesses

Businesses

Share of sales
Q1 of 2017/18 Cyclicality

Green Cars
Conventional Cars

Macro drivers

Consumer durables Technology adoption (electrification)
18%

Fuel savings

High precision
Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

Traction
Renewable energies& power supplies
82%

Drives & welding

Automotive segment
Industry segment
8Results 1st Quarter 2017/18

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Market Factors and Strategy

ATO

9Results 1st Quarter 2017/18

2. Increased Sales and Profit
In CHF millions, %Q1 2017/18

Q1 2017/18 vs.
Q1 2016/17

Orders78.8+20.8%

Sales

75.9

+13.4%

EBIT

16.0+19.2%Net profit

13.3+23.0%• Improving market conditions• Strong sales growth in China• Seasonal sales peak in the renewable energies business• Maintained high profitability• Ongoing strategy implementation• Adding production lines in Sofia and Beijing• Adding R&D capacities in all locations
10Results 1st Quarter 2017/18

2. Net Sales
In CHF millions

In CHF millions, %300

Q1 vs. Q1Sales

asreported

at constantcurrencies

275
250

Industry

62.6+14.0%+15.9%

225

Automotive

13.3+10.9%+11.5%

Total

75.9

+13.4%+15.1%

200
175

•

150
125

•

10075

•
•

50

Positive economic sentiment translated intosales growthAsia, particularly China, driving sales
growth in most businesses
High seasonal sales for solar installations
Negative currency impact on sales

25013/14

1114/1515/1616/17

Q1 17/18

Results 1st Quarter 2017/18

2. Quarterly View
In CHF millions

Book-to-bill ratio

8075.9

1.10

70.0
70

67.2

66.9

65.7

62.7

61.5

65.1

66.8

60

1.05

50

40

1.00

30

0.95

20

10

0.90

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2015/16 2015/16 2015/16 2015/16 2016/17 2016/17 2016/17 2016/17 2017/18
Orders received

12SalesBook-to-Bill ratio

Results 1st Quarter 2017/18• 4th consecutive quarterwith book-to-bill ratio
higher than 1• Uptrend of book-to-billratio pointing tocontinued positivemarket conditions• Low inventories atcustomers translate into
short-term bookings

2. Industry Segment: Business Development
In CHF millions

EBIT in % of sales

240

Businesses and Applications

25%

Drives & welding (growth Q1 vs. Q1: +8%)
• Better economic sentiment in most regions• Increased investment in automation in China

200
20%

160
15%

120

10%

Renewable energies & power supplies (+30%)• Seasonal sales peak in solar• High feed-in tariffs for Chinese solar energy
producer (15% reduction on 1 July 2017)
inflated sales
Traction (+9%)• Individual short term projects support growth• Implementation of metering projects in Europe

805%
4000%
13/14

13High-precision (-4%)• HVDC projects in China completed; no followup projects• Stable test & measurement and medicalmarkets

14/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

2. Industry Segment: Regional Markets
In CHF millions, %SalesGrowth
Q1 vs. Q1

North America

Europe

22.6

+4.9%

Asia and RoW

N. America

6.3

-3.2%

Asia and ROW

33.7+25.5%

Total

62.6+14.0%

Europe36%• Strong growth in China and in the rest ofAsia• China the single most important country
representing 37% of sales

54%10%

14Results 1st Quarter 2017/18

2. Automotive Segment: Business Development
In CHF millions

EBIT in % of sales
25%

5550
4520%

403515%302510%Businesses and Applications
Conventional cars (growth Q1 vs. Q1 : -6%)
• Weaker business in all regions, as expectedGreen cars (HEV, EV) (+44%)• Strong commitment to green cars fromautomakers around the world• Increasing consumer acceptance andgovernment support globally for green cars tounderpin future growth• Increasing attractiveness of the market lures
new competitors and affects margins

20155%

1050%

013/141514/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

2. Automotive Segment: Regional Markets
In CHF millions, %SalesGrowth
Q1 vs. Q1

Europe0.9-12.6%

N. America

4.8-2.4%

Asia and RoW

7.7+25.4%

Total

13.3+10.9%

EuropeNorth America

7%

Asia and RoW
36%

•58%

•16

Results 1st Quarter 2017/18

Performance driven by growth of green
cars business in Asia
Conventional cars business slowing inall regions

2. Business Development BulgariaProduction•••

18 production lines
256 FTE
14% of total production (14% infinancial year 2016/17)

In CHF millions
40Objectives of the site•••••1735

Diversify LEM’s cost-competitiveproduction
Increase production capacity close toEuropean customers
Increase natural hedge of operations
Absorb major part of LEM’s future
growthDevelop shared services for LEM Groupand build a local development team

30
25
20
15
10Results 1st Quarter 2017/18

50
13/14

14/15

15/16

16/17

17/18

2. Business Development ChinaSalesProduction•••Market share of over 50%
Most important market with 36% oftotal salesLEM China is the largest manufacturingsite of the Group: 59% of total
production (59% in financial year
2016/17)“Made by LEM” quality•
In CHF millions

In CHF millions

901808016070

14060

120501004080

3060

2040

102000
13/14

18

14/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

13/14

14/15

15/16

16/17 Q1 17/18

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Market Factors and Strategy

HLSR

19

Results 1st Quarter 2017/18

3. Income Statement
In CHF millions

20FY
2016/17

Q12016/17

Q1
2017/18

ChangeSales

264.5

66.9

75.9

+13.4%

Gross margin

46.7%

45.7%

46.0%

+0.3ptOperating expense

-67.8

-17.2

-18.9

+10.2%

EBIT

55.8

13.4

16.0

+19.2%Net financial exp.

-0.8

0.0

0.7

NM

Income tax

-10.4

-2.6

-3.4

+27.7%Net profit

44.6

10.8

13.3

+23.0%

Results 1st Quarter 2017/18

3. Results by Quarter
In % of sales
24%
22%
20%
18%
16%
14%
12%
10%
Q1
2015/16

Q2
2015/16

Q3
2015/16

Q4
2015/16

EBIT margin

21

Q1
2016/17

Q2
2016/17

Q3
2016/17

Net Profit in % of sales

Results 1st Quarter 2017/18

Q4
2016/17

Q12017/18

3. Gross Margin
In CHF millions

In % of sales

140FY
2016/17

Q1
2016/17

Q1
2017/18

123.6

30.6

34.9

46.7%

45.7%

46.0%

48%

Gross margin47%

in CHF millions

12046%

Gross margin
in % of sales

10045%
44%

8043%
60

•
•

Ongoing efficiency improvements
Continuous price pressure

42%
41%

4040%
2039%
38%

013/14

22

14/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

3. SG&A
In CHF millions

In % of sales

6025%

SG&A
in CHF millions

FY
2016/17

Q1
2016/17

Q1
2017/18

51.8

13.1

14.2

19.6%

19.6%

18.8%

5020%

SG&A
in % of sales

4015%•3010%•20•

Cost savings thanks to process
improvements and cost control
SG&A as a percentage of sales in longterm average
Ongoing recruitment in Beijing and Sofia

5%
100%

0
13/14

23

14/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

3. R&D Expense
In CHF millions

In % of sales

FY2016/17

Q1
2016/17

Q1
2017/18

16.0

4.0

4.7

6.1%

6.1%

6.2%

7%
16

R&D expensein CHF millions
6%

14

R&D expensein % of sales

5%

12

104%

3%

••2%

•8641%

200%
13/14

24

Ongoing renewal of product range
Acquire new technologies to address
new markets
Increase investment in R&D for bothsegment with start of new R&D centerin Lyon in April 2017

14/15

15/16

16/17

Q1 17/18

Results 1st Quarter 2017/18

3. Financial Expense
In CHF millions

25

FY
2016/17

Q1
2016/17

Q1
2017/18

Exchange effect

-0.6

+0.0

+0.7

Other financial expense & income-0.1+0.0-0.0

Total

-0.8

+0.0+0.7•

Exchange effect impacted by positive valuation of USD currency hedges•Foreign exchange hedging policy unchanged for EUR, USD and JPY

Results 1st Quarter 2017/18

3. Net Profit
In CHF millions

In % of sales

5020%

4518%

4016%

3514%

3012%

Net profit
in CHF millions

Net profit
in % of sales

FY2016/17

Q1
2016/17

Q1
2017/18

44.6

10.8

13.3

16.8%

16.1%

17.5%
Q1 2016/17+0.0-2.6

13.4
2510%

208%

156%

EBIT

10.8
Financial expense

Income tax

Net profit

Q1 2017/18
+0.7
-3.4

4%1016.0
52%

00%
13/14

26

14/15

15/16

16/17

EBITQ1 17/18

Results 1st Quarter 2017/18

13.3

Financial expense

Income tax

Net profit

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Market Factory and Strategy

HAM

27

Results 1st Quarter 2017/18

4. Market Factors and Strategy• We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged• We will continue to capitalize on
the drivers of LEM’s markets
through• pure play components company• diversification across geographiesand businesses

28Results 1st Quarter 2017/18

Financial Calendar and Contact Details

Financial calendar
The financial year runs from 1 April to 31 March

9 November 2017
8 February 201823 May 2018
28 June 2018
3 July 2018
5 July 2018

Half-year results 2017/18
Third quarter results 2017/18
Year-end results 2017/18
Annual General Meeting of Shareholders for the year 2017/18
Dividend ex-date
Dividend payment date

For further information
Andrea Borla, CFO
Phone: +41 22 706 12 50
E-mail: investor@lem.com

29Results 1st Quarter 2017/18